With low oil prices expected well into the future, many were pretty bearish on companies in the broader solar industry. After all, with lower oil prices and less demand for energy in general, the thinking was that solar wouldn't be able to compete in this environment, much like in previous downturns of oil.
But thanks to more efficient companies and changing attitudes by consumers, the near-term future look may finally be bright for many solar companies. In fact, after a big drop in late 2015 and early 2016, the industry currently has a top 10% industry rank and not a single company has a rank worse than 'hold' right now.
But which is the best company to watch in this market right now? Well, arguably, SolarEdge (SEDG - Snapshot Report) is worth a closer look as the security has some real promise to be one of the top picks in the space for 2016.
SEDG in Focus
SEDG is an Israeli company in the solar business, providing monitoring and optimizing solutions for solar panels. A main focus of the company is its 'StorEdge' products which help with providing backup power solutions and monitoring capabilities, while the company also has a partnership with Tesla and their home battery project, the Powerwall, too.
This focus on improvement instead of building panels has been a winning strategy for SEDG as the company has easily outperformed the solar industry at large, represented by the Guggenheim Solar ETF (TAN - ETF report) over the past year. SEDG has also beaten out TAN on a YTD look too, making for a compelling pick as the top choice in this space going forward.
Analyst Opinion
Analysts who follow the company appear to agree with this assessment, as they have been raising their earnings estimates for SolarEdge stock lately. In fact, not a single estimate for SEDG stock has gone lower in the past sixty days for any of the time frames that we study, while three have gone higher for the current quarter and the current year.
The magnitude of these estimate increases has also been impressive, as analysts are now baking in great growth rates for the stock. Recent revisions have bumped up this quarter's growth (year-over-year) to 84%, while we see 106% growth expected for the current year.
But before you start to worry about SolarEdge living up to these lofty expectations, consider its recent performance in earnings season. The company has beaten estimates by an average of 68% in the last four quarters, including a 171% beat!
Given these figures and its avoidance of the panel side of the business, hopefully investors can see this is a great choice in the solar market. No wonder we currently have a Zacks Rank #1 (Strong Buy) rating on the stock right now.
Bottom Line
Many investors might be pessimistic about solar given low energy prices. However, stocks here have arguably bottomed out and some nice values are starting to develop as analysts raise their earnings estimates.
One overlooked route to go is definitely with SolarEdge, the only top ranked stock in the sector right now. The security has great growth rates and it focuses on a unique part of the solar business-- instead of panels-- making it a very intriguing play for investors searching to play this segment in one of the best ways possible.
Comments
Log in or sign up to join the conversation.